Working Paper No. 89. A Generalized Knowledge Production Function

Abstract: This paper presents a generalized production model based on the knowledge production function. The model allows the relationships between corporate competitiveness strategy, innovation, efficiency, productivity growth and outsourcing to be investigated at the firm level in a number of steps. First, in reviewing recent developments of researches on the above relationships, provide discussion on data and the methods of measuring these variables. Second, depending on availability of information, different measures are transferred into single multidimensional index of corporate strategy using principal component analysis. Third, stochastic frontier production function and factor productivity analysis are used to estimate the efficiency and factor productivity growth at the firm level. Fourth, the causal relationships between the five variables of interest are established and modelled. Finally, given the direction of causality, the implications of the findings for estimation of the relationship are discussed. For the empirical analysis we use Swedish firm-level innovation survey data covering both manufacturing and service sectors.